From a shari’a perspective, zakat (mandatory alms) cannot (or need not) be payable unless a number of conditions are met. Essentially, zakat is levied on the wealth/ assets/ properties of individuals who are capable and legally bound to pay it. These conditions are: unfettered possession, actual or assumed growth, attainment of lowest amount for liability (nisab), and the passage of a lunar year (hawl). These conditions are further detailed below:

1. Unfettered possession: the owner should be able dispose of his wealth/ property/ assets (and have access thereto without cessation). According to this condition, zakat would not be payable on the property if the owner is unable to determine where is it or cannot freely dispose of it. Moreover, shari’a doesn’t require levying zakah on public property or funds (such as the state’s assets in whatever form). The same holds true for funds endowed for charity. In short, any funds designated to the benefit of the whole society are not zakatable.

2. Actual or assumed growth: It is meant by growth that property has the potential to increase in value over time. Actual growth can be achieved through trade and investment (for physical and financial assets) or reproduction and multiplying (for livestock and corps). Assumed growth is the increase in value due to the intrinsic ability of specific assets (such as cash and cash equivalents- gold and silver) to yield additional value even if left uninvested. Other types of assets, particularly fixed assets, are, by nature, not subject to zakat.

3. Attainment of lowest amount for liability: zakat will not be payable unless nisab (or minimum zakatable amount or exemption limit for the payment of zakat) has been attained. In this sense, nisab represents an exemption mechanism that allows to a certain minimum amount/ value of property to be legally excluded from zakat. This is to ensure that an individual is able to meet his needs before being asked or required to pay for others’ needs. Nisab amount varies from asset to asset. For example, for gold and sliver, it is 85 grams of gold and 595 grams of silver. Therefore, a Muslim owning 100 grams of gold is obliged to pay zakah on 15 grams (100-85) provided that other conditions are fulfilled. In general, shari’a prescribes for each zakatable asset its own nisab (for more information, see: nisab of zakah table).

4. The passage of a lunar (hijri) year: zakat falls due after the passage of one lunar year from either the first day the amount of nisab is attained or the day on which zakat was paid last year. The liability to zakat can be calculated using balances of funds at the beginning and end of a respective year. However, in the case of agricultural and horticultural produce, zakat falls due at the time of harvesting/ picking/ collecting.